Exhibit 10.2
THIS NOTE AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON
SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CONVERSION SERVICES
INTERNATIONAL, INC. THAT SUCH REGISTRATION
IS NOT REQUIRED.
AMENDED AND RESTATED SECURED CONVERTIBLE TERM NOTE
FOR VALUE
RECEIVED, CONVERSION SERVICES INTERNATIONAL, INC., a Delaware
corporation (the "Borrower"), hereby
promises to pay to LAURUS MASTER FUND,
LTD., c/o Ogier Fiduciary Services (Cayman)
Limited, P.O. Box 1234, Queensgate
House, South Church Street, George Town,
Grand Cayman, Cayman Islands, British
West Indies, Fax: 345-949-9877 (the
"Holder") or its registered assigns or
successors in interest, on order, the sum
of SEVEN HUNDRED FORTY NINE THOUSAND
DOLLARS ($749,000), together with any
accrued and unpaid interest hereon, on
August 15, 2007 (the "Maturity Date") if
not sooner paid. The original principal
amount of this Note is subject to
amortizing payments pursuant to Section 1.2
hereof is hereinafter referred to as the
"Amortizing Principal Amount". This
Note amends and restates in its entirety,
and is given in substitution for and
not in satisfaction of) that certain
promissory note in the original principal
amount of $5,000,000 issued by the Company
in favor of the Holder on August 16,
2004.
Capitalized terms used herein without definition shall have the
meanings
ascribed to such terms in that certain
Securities Purchase Agreement dated as of
the date hereof between the Borrower and
the Holder (the "Purchase Agreement").
The
following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1 (a)
Interest Rate. Subject to Sections 1.1(b), 4.12 and 5.6 hereof,
interest payable on this Note shall accrue
at a rate per annum (the "Interest
Rate") equal to the "prime rate" published
in The Wall Street Journal from time
to time, plus one percent (1%). The prime
rate shall be increased or decreased
as the case may be for each increase or
decrease in the prime rate in an amount
equal to such increase or decrease in the
prime rate; each change to be
effective as of the day of the change in
such rate. Subject to Section 1.1(b)
hereof, the Interest Rate shall not be less
than five percent (5%). Interest
shall be calculated on the basis of a 360
day year. Interest on the Amortizing
Principal Amount shall be payable monthly,
in arrears, commencing on October 1,
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2004 and on the first day of each
consecutive calendar month thereafter (each, a
"Repayment Date") and on the Maturity Date,
whether by acceleration or
otherwise. .
1.1 (b)
Interest Rate Adjustment. The Interest Rate shall be subject to
adjustment on the last business day of each
month hereafter until the Maturity
Date (each a "Determination Date"). If on
any Determination Date (i) the
Borrower shall have registered under the
Securities Act of 1933, as amended (the
"Securities Act"), the shares of Common
Stock underlying each of the conversion
of this Note and the exercise of the
Warrant issued on a registration statement
declared effective by the Securities and
Exchange Commission (the "SEC"), and
(ii) the market price (the "Market Price")
of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market (as
defined below) for the five (5)
consecutive trading days immediately
preceding such Determination Date exceeds
the then applicable Fixed Conversion Price
by at least twenty five percent
(25%), the Interest Rate for the succeeding
calendar month shall automatically
be reduced by 200 basis points (200 b.p.)
(2.0.%) for each incremental twenty
five percent (25%) increase in the Market
Price of the Common Stock above the
then applicable Fixed Conversion Price. If
on any Determination Date (i) the
Borrower shall not have registered under
the Securities Act the shares of Common
Stock underlying the conversion of this
Note and the exercise of the Warrant on
a registration statement declared effective
by the SEC or the Borrower shall
have registered such shares under the
Securities Act but on such Determination
Date the related registration statement is
not effective, and (ii) the Market
Price of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market
for the five (5) consecutive trading days
immediately preceding such
Determination Date exceeds the then
applicable Fixed Conversion Price by at
least twenty five percent (25%), the
Interest Rate for the succeeding calendar
month shall automatically be decreased by
100 basis points (100 b.p.) (1.0.%)
for each incremental twenty five percent
(25%) increase in the Market Price of
the Common Stock above the then applicable
Fixed Conversion Price.
Notwithstanding the foregoing (and anything
to the contrary contained in
herein), in no event shall the Interest
Rate be less than zero percent (0%).
1.2
Minimum Monthly Principal Payments. Amortizing payments of the
aggregate principal amount outstanding
under this Note at any time (the
"Principal Amount") shall be made by the
Company commencing on October 1,
2005_and on the first business day of each
succeeding month thereafter through
and including the Maturity Date (each, an
"Amortization Date"). Subject to
Article III below, commencing on the first
Amortization Date, the Company shall
make monthly payments to the Holder on each
Repayment Date, each such payment in
the amount of $32,565 together with any
accrued and unpaid interest on such
portion of the Principal Amount plus any
and all other unpaid amounts which are
then owing under this Note, the Purchase
Agreement and/or any other Related
Agreement (collectively, the "Monthly
Amount"). Any outstanding Principal Amount
together with any accrued and unpaid
interest and any and all other unpaid
amounts which are then owing by the Company
to the Holder under this Note, the
Purchase Agreement and/or any other Related
Agreement shall be due and payable
on the Maturity Date.
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ARTICLE II
CONVERSION REPAYMENT
2.1 (a)
Payment of Monthly Amount in Cash or Common Stock. If the
Monthly
Amount (or a portion thereof of such
Monthly Amount if such portion of the
Monthly Amount would have been converted
into shares of Common Stock but for
Section 3.2) is required to be paid in cash
pursuant to Section 2.1(b), then the
Borrower shall pay the Holder an amount
equal to 100% of the Monthly Amount due
and owing to the Holder on the Repayment
Date in cash. If the Monthly Amount (or
a portion of such Monthly Amount if not all
of the Monthly Amount may be
converted into shares of Common Stock
pursuant to Section 3.2) is required to be
paid in shares of Common Stock pursuant to
Section 2.1(b), the number of such
shares to be issued by the Borrower to the
Holder on such Repayment Date (in
respect of such portion of the Monthly
Amount converted into in shares of Common
Stock pursuant to Section 2.1(b)), shall be
the number determined by dividing
(x) the portion of the Monthly Amount
converted into shares of Common Stock, by
(y) the then applicable Fixed Conversion
Price. For purposes hereof, the initial
"Fixed Conversion Price" means $0.14.
(b) Monthly Amount Conversion Guidelines. Subject to Sections
2.1(a), 2.2 and 3.2 hereof, the Holder
shall convert into shares of Common Stock
all or a portion of the Monthly Amount due
on each Repayment according to the
following guidelines (collectively, the
"Conversion Criteria"): (i) the average
closing price of the Common Stock as
reported by Bloomberg, L.P. on the
Principal Market for the five (5)
consecutive trading days immediately preceding
such Notice Date shall be greater than or
equal to 110% of the Fixed Conversion
Price and (ii) the amount of such
conversion does not exceed twenty five percent
(25%) of the aggregate dollar trading
volume of the Common Stock for the twenty
two (22) day trading period immediately
preceding delivery of a Repayment
Notice. If the Conversion Criteria are not
met, the Holder shall convert only
such part of the Monthly Amount that meets
the Conversion Criteria. Any part of
the Monthly Amount due on a Repayment Date
that the Holder has not been able to
convert into shares of Common Stock due to
failure to meet the Conversion
Criteria, shall be paid by the Borrower in
cash on such Repayment Date, within
three (3) business days of the applicable
Repayment Date.
(c) Application of Conversion Amounts. Any amounts converted by
the
Holder pursuant to Section 2.1(b) shall be
deemed to constitute payments of, or
applied against, (i) first, outstanding
fees, (ii) second, accrued interest on
the Amortizing Principal Amount, and (iii)
third, the Amortizing Principal
Amount.
2.2 No
Effective Registration. Notwithstanding anything to the
contrary
herein, no amount payable hereunder may be
converted into Common Stock unless
(a) either (i) an effective current
Registration Statement (as defined in the
Registration Rights Agreement) covering the
shares of Common Stock to be issued
in satisfaction of such obligations exists,
or (ii) an exemption from
registration of the Common Stock is
available pursuant to Rule 144 of the
Securities Act, and (b) no Event of Default
hereunder exists and is continuing,
unless such Event of Default is cured
within any applicable cure period or is
otherwise waived in writing by the Holder
in whole or in part at the Holder's
option.
2.3
Optional Redemption of Amortizing Principal Amount. The Borrower
will
have the option of prepaying the
outstanding Amortizing Principal Amount
("Optional Amortizing Redemption"), in
whole or in part, by paying to the Holder
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a sum of money equal to one hundred fifteen
percent (115%) of the Amortizing
Principal Amount to be redeemed, together
with accrued but unpaid interest
thereon and any and all other sums due,
accrued or payable to the Holder arising
under this Note, the Purchase Agreement or
any Related Agreement (the
"Amortizing Redemption Amount") on the day
written notice of redemption (the
"Notice of Amortizing Redemption") is given
to the Holder. The Notice of
Amortizing Redemption shall specify the
date for such Optional Amortizing
Redemption (the "Amortizing Redemption
Payment Date"), which date shall be not
less than seven (7) business days after the
date of the Notice of Amortizing
Redemption (the "Redemption Period"). A
Notice of Amortizing Redemption shall
not be effective with respect to any
portion of the Amortizing Principal Amount
for which the Holder has a pending election
to convert pursuant to Section 3.1,
or for conversions initiated or made by the
Holder pursuant to Section 3.1
during the Redemption Period. The
Amortizing Redemption Amount shall be
determined as if such Holder's conversion
elections had been completed
immediately prior to the date of the Notice
of Amortizing Redemption. On the
Amortizing Redemption Payment Date, the
Amortizing Redemption Amount shall be
paid in good funds to the Holder. In the
event the Borrower fails to pay the
Amortizing Redemption Amount on the
Amortizing Redemption Payment Date as set
forth herein, then such Notice of
Amortizing Redemption will be null and void.
ARTICLE III
CONVERSION RIGHTS
3.1.
Holder's Conversion Rights. Subject to Section 2.2, the Holder
shall
have the right, but not the obligation, to
convert all or any portion of the
then aggregate outstanding Principal Amount
of this Note, together with interest
and fees due hereon, into shares of Common
Stock, subject to the terms and
conditions set forth in this Article III.
The Holder may exercise such right by
delivery to the Borrower of a written
Notice of Conversion pursuant to Section
3.3.
3.2
Conversion Limitation. Notwithstanding anything contained herein
to
the contrary, the Holder shall not be
entitled to convert pursuant to the terms
of this Note an amount that would (a) be
convertible into that number of shares
of Common Stock which, when added to the
number of shares of Common Stock
otherwise beneficially owned by such Holder
including those issuable upon
exercise of warrants held by such Holder
would exceed 4.99% of the outstanding
shares of Common Stock of the Borrower at
the time of conversion or (b) exceed
twenty five percent (25%) of the aggregate
dollar trading volume of the Common
Stock for the twenty two (22) day trading
period immediately preceding delivery
of a Notice of Conversion to the Borrower.
For the purposes of the immediately
preceding sentence, beneficial ownership
shall be determined in accordance with
Section 13(d) of the Exchange Act and
Regulation 13d-3 thereunder. The
conversion limitation described in this
Section 3.2 shall automatically become
null and void without any notice to
Borrower upon the occurrence and during the
continuance beyond any applicable grace
period of an Event of Default, or upon
75 days prior notice to the Borrower,
except that at no time shall the
beneficial ownership exceed 19.99% of the
Common Stock. Notwithstanding anything
contained herein to the contrary, following
the listing of the Borrower on the
NASDAQ SmallCap Market, the Nasdaq National
Market or the American Stock
Exchange, the number of shares of Common
Stock issuable by the Borrower and
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acquirable by the Holder at a price below
$0.20 per share pursuant to the terms
of this Note, the Security Agreement, any
Ancillary Agreement or an
